CREDIT AND FORBEARANCE AGREEMENT
--------------------------------
THIS CREDIT AND FORBEARANCE AGREEMENT (this "Agreement") is made as of
the 17th day of August, 1998, by and between the MACTARNAHAN LIMITED
PARTNERSHIP, an Oregon limited partnership ("Lender") and PORTLAND BREWING
COMPANY, an Oregon corporation ("Borrower").
Recitals.
--------
A. Borrower is obligated to Bank of America NT & SA ("Bank of
America"), under and pursuant to that certain Business Loan Agreement dated as
of December 15, 1995, as amended in six amendments numbered one through five,
and seven (a number six having never been executed), and dated as of July 23,
1996, December 19, 1996, March 27, 1997, April 23, 1997, November 24, 1997, and
May, 1998, respectively (as amended, the "Loan Agreement"). The Loan Agreement
is secured by that certain Security Agreement (Receivables, Inventory and
Equipment) dated as of December 15, 1997 (the "Security Agreement"), and by a
UCC-1 Financing Statement recorded with the Oregon Secretary of State on
December 21, 1995, and a UCC-1A Financing Statement recorded in Multnomah County
on December 27, 1996 (together with the Security Agreement, the "Security
Instruments"). The Loan Agreement and the Security Instruments are herein
together referred to as the "Loan Agreements."
B. Under the Loan Agreement Borrower is indebted to the Bank of America
under three facilities consisting of a revolving line of credit (the "Revolving
Line") and two fixed term loans (the "Term Loans").
C. Borrower is currently in default to the Bank of America under the
Loan Agreements as more particularly set forth in Schedule 1.1 to this
Agreement. Borrower is engaged in negotiations with other financial institutions
to extend credit to Borrower so that Borrower can pay and retire the Revolving
Line. To permit Borrower to conclude such negotiations, Borrower has requested
that Lender (a) purchase and take assignment of the Loan Agreements from the
Bank of America, and (b) advance to Borrower, for Borrower's working capital
requirements, up to $600,000, in addition to the amount outstanding under the
Revolving Line, as set forth in Schedule 1.2, the same to be evidenced by
Borrower's promissory note and to be secured by the Security Agreement. In
addition, Borrower has requested that Lender agree to forebear from exercising
any remedies available to it under the Loan Agreements arising by reason of
Borrower's existing default thereunder.
D. Lender is willing to acquire the Loan Agreements from Bank of
America, to make certain working capital advances to Borrower and to agree to
forebear from exercising remedies under the Loan Agreements on the terms, and
subject to the conditions, set forth in this Agreement.
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Agreement.
---------
NOW THEREFORE, in consideration of the premises and of the mutual
covenants contained herein, the parties agree:
1. Borrower's Representations and Warranties
-----------------------------------------. Borrower acknowledges
that, by an Assignment of Interest under Loan Agreements - Private, of even date
herewith, between Bank of America and Lender, Lender is acquiring all of Bank of
America's right, title and interest in the Loan Agreements and will be
substituted as the "Bank" thereunder. Borrower hereby represents and warrants to
and for the benefit of Lender, and with the knowledge that Lender is relying
hereon in acquiring the Loan Agreements pursuant to the Assignment:
1.1 Agreements in Effect; No Defaults
---------------------------------. Except as set forth in
Schedule 1.1, the Loan Agreements, and each of them, is in full force and effect
and unmodified, there exist no defenses to the enforcement of any such document
against Borrower in accordance with its terms, and there exists thereunder no
default on the part of either Borrower or the Bank, and no event or circumstance
that, with notice, the passage of time, or both, would constitute such a
default.
1.2 Outstanding Obligations
-----------------------. Attached as Schedule 1.2 to this
Agreement is a true and correct summary of the current status of each of the
credit facilities outstanding under the Loan Agreements, including, without
limitation, the outstanding principal balance of each such facility, the rate at
which interest is accruing thereunder, the amount of outstanding interest
accrued thereunder and the amount of any payment past due thereunder.
1.3 Continued Truth of Representations
----------------------------------. Except as set forth in
Schedule 1.3, each of the representations and warranties made by Borrower in the
Loan Agreements, or any of them, is true and accurate in all material respects
as of the date of this Agreement.
2. Acknowledgment
--------------. Borrower acknowledges that Lender has pledged the
Loan Agreements to the Bank as security for Lender's payment to the Bank of the
purchase price for the Loan Agreements, which amount is due and payable by
Lender to the Bank not later than August 31, 1998.
3. Forbearance; Amendment to Loan Agreement
----------------------------------------. Until the earlier of (a)
August 31, 1998, or (b) the date on which Borrower retires the outstanding
principal balance of the Revolving Line and of the New Note (defined at Section
4), Lender shall not exercise any remedy available to it under the Loan
Agreements by reason of any default existing under the Loan Agreements as of the
date of this Agreement; provided, however, that the Loan Agreement is hereby
amended so that:
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(i) From and after the date of this Agreement, Lender shall
have no obligation to make any further advance to Borrower under the Loan
Agreement in respect of the Revolving Line, the outstanding principal balance of
which is fixed as of the date of this Agreement at the amount set forth in
Schedule 1.2;
(ii) Effective September 1, 1998, the interest rate applicable
to the Revolving Line and to the Term Loans shall be the greater of (a) the
interest rate applicable under the New Note, or (b) the interest rate applicable
thereto under the Loan Agreement;
(iii) Effective on and as of the date on which Lender has paid
and discharged in full its obligation to the Bank of America in respect of the
purchase price payable for the Loan Agreements, a default under the New Note
(after giving effect to any notice and cure periods provided therein) shall
constitute a default under the Loan Agreements; and
(iv) Effective on the later of the date on which Lender has
paid and discharged in full its obligation to the Bank of America in respect of
the purchase price payable for the Loan Agreements, or September 1, 1998, the
Term Loans shall be due and payable on demand.
The Lender's agreement to forbear set forth in this Section 3 shall replace and
supersede in their entirety all prior agreements between the Bank of America and
Borrower concerning the Bank's forbearance under the Loan Agreements.
4. Promissory Note
---------------. Contemporaneously with execution and delivery of
this Agreement, Borrower has executed and delivered to Lender, Borrower's
promissory note in the original principal amount of $600,000.00 (the "New
Note"). From and after the date of this Agreement, through and including the
date upon which Lender's agreement to forbear under Section 3 expires (the
"Expiration Date"), Lender shall lend to Borrower under the New Note up to Six
Hundred Thousand and 00/100 Dollars ($600,000.00) in up to six separate
advances, each such advance to be made within two (2) business days following
Borrower's written request therefor; provided, that in no event shall Lender be
obligated to advance sums under the New Note at a time when the outstanding
principal balance of the New Note exceeds the Borrowing Base (as such term is
defined in Exhibit A) or if the advance would cause the outstanding principal
balance of the New Note to exceed the Borrowing Base. From and after the
Expiration Date, Lender may, but shall not be obligated to, make additional
advances to Borrower of amounts that Borrower has previously repaid to Lender
under the New Note.
5. Security Agreement
------------------. Borrower hereby acknowledges that the New Note,
and all amounts advanced, accruing or that might otherwise come due thereunder
or under this Agreement, constitute "Indebtedness" under the Section 2 of the
Security Agreement and payment and performance thereof is therefore secured by
the Security Agreement.
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6. Fees and Expenses
-----------------. Borrower shall pay directly when due, or shall
reimburse to Lender on demand, all of Lender's reasonable out-of-pocket costs
and expenses, to the extent incurred by Lender in connection with the
negotiation, preparation, review, carrying out, amendment, waiver, refinancing,
restructuring, reorganization and enforcement of, and collection pursuant to,
this Agreement, the Loan Agreements, the New Note, any advance or disbursement
under the New Note, any substitution of security under this Agreement or the
Security Agreement, and any amendment of any financing statement made or given
pursuant to this Agreement or the Security Agreement including, without
limitation, Lender's reasonable attorneys' fees; fees of Lender's certified
public accountants and other outside experts; credit reports; appraisal fees;
lien searches; escrow charges; recording or filing fees; insurance premiums;
inspection, due diligence and/or audit fees before execution hereof and
periodically during the term hereof; and any and all other expenses or charges
incurred in connection hereof.
7. General Provisions.
------------------
7.1 Governing Law
-------------. This Agreement shall be enforced and
construed in accordance with the laws of Oregon and Borrower waives the right to
be sued elsewhere.
7.2 Successors and Assigns
----------------------. This Agreement shall be binding
upon Borrower and the successors and legal representatives of Borrower, and
shall inure to the benefit of Lender and its successors, assigns and legal
representatives. All references herein to Lender shall include any subsequent
owner and/or holder of the Loan Agreements, the New Note, or any interest in any
of them.
7.3 Cumulative Remedies
-------------------. Lender's rights, remedies and
recourse under the New Note, the other Loan Agreements, or this Agreement are
separate and cumulative and may be pursued separately, successively or
concurrently, are non-exclusive and the exercise of any one or more of them
shall in no way limit or prejudice any other legal or equitable right, remedy or
recourse to which Lender may be entitled.
7.4 Modifications
-------------. No provision hereof shall be modified or
limited by course of conduct, usage of trade, by the law merchant or in any
other manner except by a written agreement expressly referring hereto and to the
provision so modified or limited and signed by Borrower and Lender.
7.5 Severalty
---------. In case any one or more of the provisions
contained in this Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such invalid, illegal or unenforceable provision had never been
contained herein.
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7.6 Notices
-------. All notices or other communications required or
permitted hereunder shall be in writing, and shall be personally delivered
(including by means of professional messenger service) or sent by registered or
certified mail, postage prepaid, return receipt requested, or by facsimile
transmission followed by delivery of a "hard" copy, and shall be deemed received
upon the date of receipt thereof, as follows:
If to Lender: MacTarnahan Limited Partnership
00000 XX Xxxxxxxxx Xxx.
Xxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attn: Xxxxx XxxXxxxxxxx
With a copy to: Xxxxxx & Xxxxxx
0000 X.X. Xxxxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attn: Xxxxx X. Xxxxxx
If to Borrower: Portland Brewing Company
0000 XX 00xx Xxx.
Xxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attn: Xxxx Xxxxx
With a copy to: Xxxxxxx Xxxxxxxxxx & Xxxxx PC
0000-0000 XxxXxxx Xxxxxx
0000 XX 0xx Xxx
Xxxxxxxx, XX 00000
Telecopy: (000) 000-0000
Attn: Xxxx X. Xxxxxxxx
Notice of change of address shall be given by written notice in the manner
specified in this Section 7.6.
7.7 Attorneys' Fees
---------------. Should any litigation be commenced
between the parties concerning this Agreement or the transactions contemplated
hereby, the prevailing party in such litigation shall be entitled, in addition
to such other relief as may be granted, to receive from the losing party a
reasonable sum as and for its attorneys' fees, at trial, on appeal, in
connection with any petition for review, or in any proceeding before a U.S.
Bankruptcy Court, said amount to be set by the court before which the matter is
heard.
7.8 No Separate Agreements
----------------------. This Agreement, the New Note and
the Loan Agreements contain all of the agreements of Borrower and Lender
concerning their subject matter and the rights and obligations of Borrower with
respect thereto, and there are no other agreements or understandings concerning
the same between Borrower and Lender.
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7.9 Entire Agreement
----------------. This Agreement, together with the
exhibits listed below and any other document to be furnished pursuant to the
provisions hereof embody the entire agreement and understanding of the parties
hereto as to the subject matter contained herein. There are no restrictions,
promises, representations, warranties, covenants, or undertakings other than
those expressly set forth or referred to in such documents. This Agreement and
such documents supersede all prior agreements and understandings among the
parties with respect to the subject matter hereof.
Exhibit A - Definition of Borrowing Base
Schedule 1.1 - Existing Defaults
Schedule 1.2 - Status of Each Credit Facility
Schedule 1.3 - Exceptions to Representations and Warranties
In witness whereby, the parties have executed this Agreement by and
through their duly authorized officers as of the date and year first written
above.
MACTARNAHAN LIMITED PARTNERSHIP,
an Oregon limited partnership
By: Xxxxxx Mill and Logging Supply Co.,
dba Xxxxxx Company, its general partner
By: /s/ Xxxxxx X. XxxXxxxxxxx
-------------------------------------
Name: Xxxxxx X. XxxXxxxxxxx
-----------------------------------
Title: President
----------------------------------
PORTLAND BREWING COMPANY,
an Oregon corporation
By: /s/ C.A. Xxxxx
-----------------------------------------
Name: C.A. Xxxxx
---------------------------------------
Title: President
--------------------------------------
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EXHIBIT A
DEFINITION OF BORROWING BASE
----------------------------
As used in this Agreement, the term "Borrowing Base" shall mean the sum of:
(a) 85% of the balance due on Qualifying Receivables; and
(b) 50% of the value of Qualifying Inventory;
where:
(i) Qualifying Receivables shall mean outstanding Trade Receivables
that have aged less than ninety (90) days from invoice date, less any portion
thereof constituting either (A) keg deposits, or (B) contra accounts receivable
in respect of accounts payable to customers, and
(ii) Qualifying Inventory, unless and until the parties otherwise agree
in writing, shall mean "Inventory consisting of finished goods, work in process
and raw materials (not including packaging supplies)," as such phrase appears in
and was applied in application under that certain Amendment No. 3 to Business
Loan Agreement included among the Loan Agreements (including, without
limitation, provisions therein applicable to the valuation of Inventory).
